Financial Statements LARRAIN VIAL ADMINISTRADORA GENERAL DE FONDOS S.A.

Transcription

1 Financial Statements LARRAIN VIAL ADMINISTRADORA GENERAL DE FONDOS S.A. Santiago, Chile

2 LARRAIN VIAL ADMINISTRADORA GENERAL DE FONDOS S.A ÍNDEX Page REPORT OF INDEPENDENT AUDITORS... 1 STATEMENT OF FINANCIAL POSITION... 3 STATEMENT OF COMPREHENSIVE INCOME... 4 STATEMENT OF CHANGES IN EQUITY... 5 STATEMENT OF CASH FLOWS... 7 Note 1 - Corporate Information... 8 Note 2 - Significant Accounting Policies Note 3 - New Standards and Interpretations Issued, but Not Effective Note 4 - Accounting Changes Note 5 - Financial Risk Management Note 6 - Cash and Cash Equivalents Note 7 - Other Current Financial Assets Note 8 - Current Trade and Other Receivables Note 9 - Property, Plant and Equipment Note 10 - Taxes Note 11 - Current Trade and Other Payables Note 12 - Current Receivables and Payables, Related Entities Note 13 - Other Current Provisions Note 14 - Current Provisions for Employee Benefits Note 15 - Other Current Non-Financial Assets and Liabilities Note 16 - Equity Note 17 - Income from Operating Activities Note 18 - Administrative Expenses Note 19 - Exchange Rate Differences Note 20 - Local and Foreign Currency Note 21 - Sanctions Note 22 - Commitments and Contingencies Note 23 - Environment Note 24 Significant events Note 25 Subsequent Events Ch$ : Chilean Pesos : Thousands of Chilean Pesos UF : Unidad de Fomento (Units indexed by inflation)

3 EY Chile Avda. Presidente Riesco 5435, piso 4, Santiago Tel: +56 (2) Report of Independent Auditors To the Shareholders and Directors of Larraín Vial Administradora General de Fondos S.A.: We have audited the accompanying financial statements of Larraín Vial Administradora General de Fondos S.A., which comprise the statement of financial position as of December 31, 2014, and the statements of comprehensive income, the statements of changes in equity and the statements of cash flows for the year ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in conformity to instructions and standards of preparation and presentation of financial information issued by the Superintendency of Securities and Insurance described in Note 2 of the financial statements. This responsibility includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards in Chile. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. A member firm of Ernst & Young Global Limited 1

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Larraín Vial Administradora General de Fondos S.A. as of December 31, 2014, and the results of its operations and its cash flows for the year then ended on that date in accordance with instructions and standards of preparation and presentation of financial information issued by the Superintendency of Securities and Insurance described in Note 2. Basis of accounting As described in Note 2 of the financial statements, under its authority the Superintendency of Securities and Insurance issued Circular No. 856, dated October 17, 2014, instructing audited entities, to register in the respective year against equity differences in assets and liabilities deferred taxes arising as a direct effect of the increase in the tax rate introduced by Law 20,780, changing the course of preparation and presentation of financial information adopted as of that date, given that the previous framework (IFRS) requires it be adopted in a comprehensive, explicit and unreserved manner. As of December 31, 2014, and for the year then ended, quantifying the change in the accounting framework is also included in Note 2. Our opinion is unchanged in this matter. Other Matters Previously, we have audited, in accordance with auditing standards generally accepted in Chile, the attached financial statements as of December 31, 2013 of Larrain Vial Administradora General de Fondos S.A., and in our report dated March 28, 2014, we expressed an unmodified audit opinion on those financial statements. Rodrigo Arroyo N. EY LTDA. Santiago, Chile March 27, A member firm of Ernst & Young Global Limited

5 LARRAIN VIAL ADMINISTRADORA GENERAL DE FONDOS S.A STATEMENT OF FINANCIAL POSITION Note Assets Current Assets Cash and cash equivalents 6 789,284 1,745,413 Other financial assets current 7 7,595,348 5,159,695 Other non-financial assets, current ,624 Trade receivables and other receivables, current 8 693,514 1,184,230 Receivables from related entities, current 12 3,773,812 3,921,499 Total current assets 12,852,448 12,196,461 Non-current assets Property, plant and equipment 9-61,587 Deferred tax assets , ,474 Total non-current assets 229, ,061 Total Assets 13,081,672 12,437,522 Equity and Liabilities Liabilities Current Liabilities Other current financial liabilities - 3,356 Trade accounts and other payables, current , ,942 Payables to related entities, current 12 1,213,235 1,424,923 Other current provisions 13 1,679,406 1,340,546 Current tax liabilities , ,135 Current provisions for employee benefits , ,649 Other non-financial liabilities current 15 57,440 86,199 Total current liabilities 4,454,784 4,402,750 Total Liabilities 4,454,784 4,402,750 Equity Issued capital 16 5,609,346 5,609,346 Accumulated profit 3,077,454 2,485,338 Other reserves ( ) ( 59,912) Equity attributable to the owners of the controlling entity 8,626,888 8,034,772 Non-controlling interests - - Total Equity 8,626,888 8,034,772 Total Equity and Liabilities 13,081,672 12,437,522 The accompanying notes 1 to 25 are an integral part of these Financial Statements 3

6 Statement of Income Profit (loss) LARRAIN VIAL ADMINISTRADORA GENERAL DE FONDOS S.A STATEMENTS OF COMPREHENSIVE INCOME For the years ended December 31, 2014 and Note Income from operating activities 17 25,312,345 23,500,862 Gross profit 25,312,345 23,500,862 Administrative expenses 18 (20,071,070) (19,157,285) Exchange differences ,887 Profit (loss) provided by (used in) operating activities (20,018,087) (19,152,398) Income tax expenses, continuing operations 10 (1,064,298) (843,769) Profit 4,229,960 3,504,695 Profit, attributable to Profit attributable to the owners of the controlling entity 4,229,960 3,504,695 Profit attributable to non-controlling interests - - Profit 4,229,960 3,504,695 Statements of Comprehensive Income /31/ /31/2013 Profit 4,229,960 3,504,695 Total comprehensive income 4,229,960 3,504,695 Comprehensive income attributable to Comprehensive income attributable to the owners of the controlling entity 4,229,960 3,504,695 Comprehensive income attributable to non-controlling interests - - Total comprehensive income 4,229,960 3,504,695 The accompanying notes 1 to 25 are an integral part of these Financial Statements 4

7 STATEMENT OF CHANGES IN EQUITY For the years ended December 31, 2014 and Issued capital Other miscellaneous reserves Other reserves Accumulated profits (losses) Equity attributable to the ow ners of the controlling entity Noncontrolling interests Total equity Initial balance as of 01/01/2014 5,609,346 ( 59,912) ( 59,912) 2,485,338 8,034,772-8,034,772 Increase (decrease) due to changes in accounting policies Error correction increase (decrease) Restated initial balance Changes in equity Comprehensive income Profit 4.229, , ,960 Other comprehensive income Comprehensive income Equity issued Distributed Dividends (3,662,274) (3,662,274) - (3,662,274) Other contributions of the ow ners Other distributions to the ow ners Transfers and other changes increase ,430 24,430-24,430 Transactions w ith treasury shares in portfolio increase (decrease) Changes in interests in the ow nership of subsidiaries that do not give rise to control loss increase (decrease) Total changes in equity , , ,116 Final balance as of 12/31/2014 5,609,346 ( 59,912) ( 59,912) 3,077,454 8,626,888-8,626, The accompanying notes 1 to 25 are an integral part of these Financial Statements 5

8 STATEMENT OF CHANGES IN EQUITY 2013 For the year ended December 31, 2014 and 2013 Other miscellaneous reserves Accumulated profits (losses) Equity attributable to the ow ners of the controlling entity Noncontrolling interests Issued capital Other reserves Total equity Initial balance as of 01/01/2013 5,609,346 ( 59,912) (59,912) 2,505,613 8,055,047-8,055,047 Increase (decrease) due to changes in accounting policies Error correction increase (decrease) Restated initial balance Changes in equity Comprehensive income Profit 3,504,695 3,504,695-3,504,695 Other comprehensive income Comprehensive income Equity issued Distributed Dividends (3,524,970) (3,524,970) - (3,524,970) Other contributions of the ow ners Other distributions to the ow ners Transfers and other changes increase ,034,385 1,034,385-1,034,385 Transactions w ith treasury shares in portfolio increase (decrease) Changes in interests in the ow nership of subsidiaries that do not give rise to control loss increase (decrease) Total changes in equity (20,275) (20,275) - (20,275) Final balance as of 12/31/2013 5,609,346 ( 59,912) (59,912) 2,485,338 8,034,772-8,034,772 The accompanying notes 1 to 25 are an integral part of these Financial Statements 6

9 LARRAIN VIAL ADMINISTRADORA GENERAL DE FONDOS S.A STATEMENTS OF CASH FLOWS For the years ended December 31, 2014 and Cash flows provided by (used in) operating activities Types of charges for operating activities Charges from the sale of goods and the provision of services 28,902,031 26,731,500 Other charges relating to operating activities ( 4,896) 106,411 Types of payments Payments to suppliers for the provision of goods and services (20,672,399) (19,305,090) Payments to and on behalf of the employees (2,917,701) (3,664,631) Other payments relating to operating activities 49,959 ( 112,463) Income taxes refund (payment) ( 113,268) ( 466) Cash flows provided by operating activities 5,243,726 3,755,261 Cash flows provided by (used in) investing activities Other charges for the sale of equity or debt instruments of other parties 49,613,386 39,056,281 Other payments to acquire equity or debt instruments of other parties (52,169,414) (38,523,713) Related parties loans ( 144) - Cash flows provided by (used in) investing activities (2,556,172) 532,568 Cash flows provided by (used in) financing activities Related parties loans ( 299,457) - Reimbursements of loans classified as funding activities (166,607) Dividends paid (3,444,695) (3,507,946) Cash flows (used in) financing activities (3,643,683) (3,674,553) Net Increase (Decrease) in Cash and Cash equivalents before the effect resulting from changes in exchange rate ( 956,129) 613,276 Cash and Cash equivalents at the beginning of the year 1,745,413 1,132,137 Cash and Cash equivalents at the end of the year (Note 6) 789,284 1,745,413 The accompanying notes 1 to 25 are an integral part of these Financial Statements 7

10 Note 1 - Corporate Information Larrain Vial Administradora General de Fondos S.A. (the Company) was constituted via public document dated February 21, The Company is a special corporation subject to regulation by the Superintendency of Securities and Insurance (SVS) and has as an exclusive objective, pursuant to the provisions of Law No. 20,712 regarding the Administration of Third Party Funds and Individual Portfolios, the administration of third party resources, without prejudice to perform other activities complementary to its business activities The Company manages mutual funds and investment funds and portfolios of third parties under the terms of the above Law No. 20,712 on the Administration of Third Party Funds and Individual Portfolios. Modifications to the Company are as follows: (a) the merger by absorption agreed upon at the Extraordinary Shareholders Meeting held on April 26, 2004 with the companies Larraín Vial S.A. Administradora de Fondos Mutuos S.A. and Larraín Vial S.A. Administradora de Fondos de Inversión de Capital Extranjero. In that same meeting they also agreed to change the type of corporation of Administradora General de Fondos and renamed the Company Larraín Vial Administradora General de Fondos S.A. This modification was approved by SVS Exempt Resolution 352, dated July 28, 2004; and (b) the merger by absorption agreed upon at the Extraordinary Shareholders Meeting held on August 31, 2009 with the company Consorcio S.A. Administradora General de Fondos, by virtue of which the latter was dissolved, transferring all of its assets, liabilities and income accounts to Larraín Vial Administradora General de Fondos S.A., who is the legal successor of all rights and obligations, for accounting purposes, effective as of July 1, This modification was approved by SVS Exempt Resolution 769, dated November 11, (c) at the Extraordinary Shareholders Meeting held on December 11, 2014, shareholders agreed among other things, to change the name of the Company to "Larrain Vial Asset Management Administradora General de Fondos S.A. and adapt its object and liquidation procedure to the provisions of Law No. 20,712 on the Administration of Third Party Funds and Individual Portfolios. These amendments are pending approval by the Superintendency of Securities and Insurance. As of December 31, 2014, the Company has 72 employees. 8

11 Note 1 Corporate information (continued) The registered address of the Company is Isidora Goyenechea 2800, 15 th floor, Las Condes, Santiago, Chile. The Taxpayer ID number of Larraín Vial Administradora General de Fondos S.A. is K, and their website is These financial statements as of December 31, 2014 have been approved by the Board of the Company on March 27, As of December 31, 2014, the most important shareholders of Larraín Vial Administradora General de Fondos S.A. are detailed as follows: Rut Shareholders No. of shares Porcentage LVCC Asset Management S.A ,999895% Larrain Vial S.A. 6 0,000079% Consorcio Financiero S.A. 2 0,000026% The corporate structure of LVCC Asset Management S.A., as of December 31, 2014 is as follows: Rut Shareholders Porcentage Larrain Vial S.A. 75% Consorcio Financiero S.A. 25% Our financial statements are audited by EY Ltda., a firm registered with the register of auditors under 003 of the SVS. 9

12 Note 1 Corporate Information (continued) Holding chart, December

13 Note 1- Corporate Information (continued) The Funds administered by Larraín Vial Administradora General de Fondos S.A. are detailed as follows: 1. Investment Funds FONDO DE INVERSION LARRAIN VIAL - BEAGLE FONDO DE INVERSION LARRAIN VIAL - CORDILLERA FONDO DE INVERSION LARRAIN VIAL - DEUDA CORPORATIVA FONDO DE INVERSION LARRAIN VIAL - DEUDA LATAM HIGH YIELD FONDO DE INVERSION LARRAIN VIAL - MAGALLANES II FONDO DE INVERSION LARRAIN VIAL - FALCOM RENTA FIJA MEXICO 2. Private Investment Funds Fondo de Inversión Privado Larrain Vial - México Fondo de Inversión Privado Larrain Vial - México II Fondo de Inversión Privado Larrain Vial - Perú Fondo de Inversión Privado Larrain Vial - Perú II Fondo de Inversión Privado Larrain Vial - Latin American High Yield Bond UF Fondo de Inversión Privado Larrain Vial - Latin American High Yield Bond UF II 3. Mutual Funds FONDO MUTUO CONSORCIO ACCIONES CHILENAS FONDO MUTUO CONSORCIO BALANCEADO CONSERVADOR FONDO MUTUO CONSORCIO BALANCEADO CRECIMIENTO FONDO MUTUO CONSORCIO BALANCEADO MODERADO FONDO MUTUO CONSORCIO AHORRO NOMINAL FONDO MUTUO CONSORCIO AHORRO UF FONDO MUTUO CONSORCIO AHORRO LARGO PLAZO FONDO MUTUO LARRAINVIAL PORTFOLIO LIDER FONDO MUTUO LARRAINVIAL ACCIONES NACIONALES FONDO MUTUO AHORRO ACTIVO FONDO MUTUO LARRAINVIAL AHORRO A PLAZO FONDO MUTUO LARRAINVIAL AHORRO CAPITAL FONDO MUTUO LARRAINVIAL AHORRO CENTRAL FONDO MUTUO LARRAINVIAL ENFOQUE FONDO MUTUO LARRAINVIAL AHORRO ESTRATEGICO FONDO MUTUO LARRAINVIAL MERCADO MONETARIO FONDO MUTUO MI AHORRO FONDO MUTUO LARRAINVIAL PROTECCION FONDO MUTUO LARRAINVIAL HIPOTECARIO Y CORPORATIVO FONDO MUTUO LARRAINVIAL CASH FONDO MUTUO LARRAINVIAL BONOS LATAM FONDO MUTUO LARRAINVIAL BONOS HIGH YIELD GLOBAL FONDO MUTUO LARRAINVIAL DOLAR GLOBAL FONDO MUTUO LARRAINVIAL ASIA 11

14 Note 1 Corporate Information (continued) 3. Mutual Funds (continued) FONDO MUTUO LARRAINVIAL BRASIL FONDO MUTUO LARRAINVIAL ESTADOS UNIDOS FONDO MUTUO LARRAINVIAL LATINOAMERICANO FONDO MUTUO LARRAINVIAL MEGATENDENCIAS FONDO MUTUO LARRAINVIAL MONEY MARKET FONDO MUTUO LARRAINVIAL PERU FONDO MUTUO LARRAINVIAL MERCADOS EMERGENTES FONDO MUTUO LARRAINVIAL LATAM EX BRASIL FONDO MUTUO LARRAINVIAL DISPONIBLE FONDO MUTUO LARRAINVIAL EUROPA FONDO MUTUO LARRAINVIAL AHORRO LARGO NOMINAL FONDO MUTUO LARRAINVIAL ESPAÑA FONDO MUTUO LARRAINVIAL OPORTUNIDAD CHILE Note 2 - Significant Accounting Policies The significant accounting policies applied in the preparation of these financial statements are described below: 2.1 Basis of preparation and basis of presentation The financial statements have been prepared in accordance with guidelines and standards for the preparation and presentation of financial information issued by the Superintendency of Securities and Insurance (SVS), which are composed of the International Financial Reporting Standards (IFRS), plus specific regulations issued by SVS. Accordingly, these financial statements have not been prepared in accordance with IFRS, as noted in the next paragraph. Certain accounting practices applied by the Company that conform to IFRS and SVS rules may not conform to generally accepted accounting principles in the United States ( US GAAP ). For the convenience of the reader, these financial statements have been translated from Spanish to English. Through Circular No. 856 of October 17, 2014, the Superintendency of Securities and Insurance states that the differences in assets and liabilities for deferred taxes arising as a direct effect of the increase in the first category tax rate introduced by Law No , should be recorder in the respective year against equity. The Company recorded an adjustment of 24,430 for this item. See note 16 e). 12

15 Note 2 - Significant Accounting Policies (continued) 2.2 Periods covered The financial statements correspond to the statement of financial position as of December 31, 2014 and 2013, the statements of comprehensive income, statements of cash flows and statements of changes in equity for the period between January 1, as of December 31, 2014 and Functional and presentation currency The Company uses the Chilean peso as its functional and presentation currency in its financial statements. The functional currency has been determined considering the economic environment in which the Company operates and the currency in which the most significant cash flows are generated. 2.4 Transactions and balances in foreign currency and readjustable units Transactions in a currency other than the functional currency are considered in their respective currency and are initially recorded at the exchange rate in force as of the transaction date. Monetary assets and liabilities in foreign currency are converted at the exchange rate of the functional currency as of the date of the Statement of Financial Position. All differences are either charged or credited to income for the year. Assets and liabilities in readjustable units or foreign currency have been converted to Chilean pesos at the exchange rate in force as of year closing: Decembrer 31, 2014 Ch$ December 31, 2013 Ch$ Dólar USD Euro EUR Unidades de Fomento UF 24, ,

16 Note 2 - Significant Accounting Policies (continued) 2.5 Cash and cash equivalents Cash and cash equivalents include cash on hand and bank overdrafts. 2.6 Trade receivables and other receivables Trade receivables and other receivables are initially recognized at fair value and then at amortized cost according to the effective interest rate method less impairment, if any. An impairment loss provision is recorded for trade receivables and other receivables when there is an indication that the Company will not be able to collect all indebted amounts in accordance with the original terms of the receivables. This category includes income derived by the mutual funds and investment funds administered and income arising out of fees charged to the fund participants that redeem shares prior to the date in which the minimum time in the mutual fund becomes due, if appropriate. They are recorded at nominal value and are completely collectable; therefore they are not tested for impairment. (See Note 8) 2.7 Financial assets and liabilities The Company classifies its financial assets at fair value or amortized cost in accordance with IFRS 9. Classification depends on the business model used to administer these assets and its contractual characteristics. a) Financial assets at fair value with effects on income Financial assets that correspond to securities acquired in order to generate profits from the fluctuation of prices in the short term or through intermediation margins or are included in a portfolio where there is a profit pattern. Financial instruments are recorded as of December 31, 2014 and 2013 at the fair value thereof in accordance with market prices as of the closing date of the Statement of Financial Position. This category includes investments in mutual funds, investment funds, bonds and promissory notes. (See Note 7) 14

17 Note 2 - Significant Accounting Policies (continued) 2.7 Financial assets and liabilities (continued) Bonds and Promissory Notes They are valued and presented at market value as of the closing date of these financial statements. Shares in Mutual Funds: In accordance with the standards presently in force, investments in shares in mutual funds are presented at the redemption value thereof as of the closing date of the relevant financial statements. Derivative Instruments: The fair value of derivative contracts is obtained from market prices, cash flows, discount models, and option valuation models, as appropriate. Derivative contracts are reported as assets when their fair value is positive and as liabilities when the same is negative. Shares in Investment Funds: In accordance with the standards presently in force, investments in shares in investment funds are presented at the redemption value thereof as of the closing date of the relevant financial statements. b) Financial Liabilities: The financial liabilities measured at fair value with changes in income or at amortized cost using the effective interest rate method. A financial liability is classified to be measured at fair value if the same is held to negotiate. As of the closing date of the financial statements, the Company has not classified financial liabilities at fair value. The other liabilities are measured at amortized cost. 15

18 Note 2 - Significant Accounting Policies (continued) 2.8 Property, plant and equipment This category includes furniture and office supplies. The items in this category are recognized at historic cost less accumulated depreciation and accumulated impairment losses, if any. The historic cost includes expenses directly attributable to the acquisition and location of the good so it may operate as expected by the management of the Company. Subsequent costs are included in the initial value of the asset or they are recognized as separate assets only when these costs increase the capacity or useful life of the goods and future economic benefits will flow to the Company and the cost may be reliably measured. All other operations or maintenance are charged to the income for the year. Depreciation is calculated using the straight line method during the estimated useful life of each good. The estimated useful lives of property, plant and equipment are detailed as follows: Property, plant and equipment Other fixed assets Number of years 3 years 3 years The useful lives and residual values of property, plant and equipment are reviewed and adjusted, if necessary, as of each year closing. When the carrying amount of an asset is higher than its recoverable amount, its value is reduced to the recoverable amount of the same. Losses and profits derived from the sale of these types of assets are calculated comparing the income earned to the carrying amount and they are included in the statement of income. 16

19 Note 2 - Significant Accounting Policies (continued) 2.9 Income taxes and deferred taxes The first category income tax at year end is recognized on the basis of taxable income determined in accordance with current tax legislation, recognizing the related expense. The recognition of assets and liabilities regarding the future estimate of the tax effects attributable to temporary differences between the accounting values of assets and liabilities and the tax values of the same. Deferred tax assets and liabilities are measured on the basis of the tax rate that according to the current legal provisions in force has to be applied in the year in which deferred tax liabilities are recognized or liquidated. The effects of future changes in the tax law or the tax rates are recognized in the deferred taxes from the date in which the law approving such changes is published. Los impuestos diferidos se presentan netos de acuerdo con NIC 12. As mentioned in Note 2, the Superintendency of Securities and Insurance through Circular No. 856 of October 17, 2014, states that the differences in assets and liabilities for deferred taxes arising as a direct effect of the increase in the tax rate introduced by Law No. 20,780 will be recorded in the respective year against equity. The rates applied for the determination of deferred taxes are as follows: Year Partially Integrated % ,5% % ,5% % 17

20 Note 2 - Significant Accounting Policies (continued) 2.10 Provisions Provisions are liabilities in which there is no certainty about their amount or maturity. These provisions are recognized in the Statement of Financial Position when the following requirements are fulfilled: It is a present obligation as a result of a past event and; As of the date of these financial statements it is probable that the Company has to use resources to pay the obligation and the amount of these resources may be reliably measured. A contingent asset or liability corresponds to any right or obligation arising out of past events whose existence will be confirmed only if one or more uncertain events occur in the future that are not under the control of the Company. The main provisions made by Larraín Vial Administradora General de Fondos S.A. correspond to the concepts of: Auditing Publicity Legal Custody titles Other expenses The Company does not record a bad debt provision since trade receivables balance may be recovered Employee Benefits a. Employee vacation The annual cost of personnel vacation is recognized on an accrual basis. b. Short term benefits The Company provides an annual incentives plan for its employees for the fulfillment of objectives and individual contribution to the Company s income. These incentives are given based on a set number or portion of monthly wages, and the provisions for these are based on the estimated amount to be distributed. 18

21 Note 2 - Significant Accounting Policies (continued) 2.12 Revenue recognition Income is recorded on an accrual basis as required in IAS 18 according to which income from the provision of services must be reliably measured and must be recognized considering the stage of completion of the transaction as of the statement of financial position date. Income may be reliably estimated when all the conditions below are met: Income may be reliably measured; It is probable that economic benefits will flow to the Company; The stage of completion at the statement of financial position date may be measured reliably; and Costs incurred as well as those to be incurred in order to complete the same may be measured reliably. Remuneration and commissions The Company recognizes on a daily basis, at nominal value in the statement of income and upon accrual thereof, the income on account of remunerations charged to the funds administrated on the basis of a percentage of the fund equity and fees charged to the participants that redeem shares prior to completing the minimum time in the mutual funds and investment funds that so require it. Finance Income Finance income is recognized ratably to the time elapsed using the effective interest rate method and including interest and readjustments to the debt instruments. 19

22 Note 2 - Significant Accounting Policies (continued) 2.13 Administrative Expenses Expenses are recognized in income when there is a decrease in the future economic benefits related to an asset reduction or a liability increase that may be reliably measured. Expenses and the liability increase or the asset decrease are recorded at the same time. An expense is recognized when a disbursement does not trigger future economic benefits or when the requirements to be recorded as an asset are not fulfilled. On the contrary, if disbursements are expected to give rise to future economic benefits, a general and rational procedure is used for the allocation of expenses, applying the relevant depreciations or amortizations in a way as to have income and expense correlation. Administrative expenses include remuneration and compensation of the supporting units employees, depreciation of offices, equipment, facilities and furniture used to perform these functions, asset impairment losses or reversals, amortizations of non-current assets, profits or losses arising out of sale of property, plant and equipment and other general and administrative expenses Use of estimates and judgments In order to prepare these financial statements the management needs to make judgments, estimates and assumptions that affect the application of the accounting principles and the amounts of assets, liabilities, income and expenses presented. The real results may differ from these estimates. The relevant estimates and assumptions are regularly reviewed by the upper management of the Company in order to quantify certain assets, liabilities, income, expenses and uncertainties. Reviews of accounting estimates are recognized in the period in which the estimate is reviewed and in any future period that is affected. Specifically, the information about the most significant areas of uncertainty, estimates and critical judgments in the application of accounting policies and that cause the most relevant impact on the amounts recognized in the financial statements are detailed as follows: Fair value of assets and liabilities (Note 7) Commitments and Contingencies (Note 22) Deferred taxes (Note 10) Other short-term provisions (Note 13) Useful lives of property, plant and equipment (Note 9) 20

23 Note 2 - Significant Accounting Policies (continued) 2.15 Trade accounts and other payables, current Trade accounts and other payables are recorded at amortized cost. Trade creditors and other current payables are recognized at nominal value since the average payment term is less than 30 days and there are no material differences with the fair value of the same. Trade creditors include the payment obligations with suppliers in relation to the goods and services acquired during the regular course of business Payables to related entities, current The contractual services provided by Larraín Vial S.A. (Stockbroker) to Larraín Vial Administradora General de Fondos S.A. correspond to monthly commissions for investment and maintenance of Mutual Fund shares. In turn, Larrain Vial S.A. Corredora de Bolsa provides services, such as brokerage of debt instruments and equity for funds, to Larrain Vial Administradora General de Fondos S.A. These transactions are consistent with the appropriate agreements and are recorded at nominal value. The accounts related to Larraín Vial S.A. Corredora de Bolsa are paid within a 30 day term following the issue of the invoice. The contractual services provided by Compañía de Seguros de Vida Consorcio Nacional de Seguros S.A. and Consorcio Corredores de Bolsa S.A. ( Consorcio Group Holding ) to Larraín Vial Administradora General de Fondos S.A. correspond to monthly commissions for investment and maintenance of Mutual Fund shares. The accounts related to Holding Grupo Consorcio are paid within a 30 day term following the issuance of the invoice with regard to the same and at year end for the difference of commissions that have been reflected in the statement of financial position. 21

24 Note 2 - Significant Accounting Policies (continued) 2.16 Payables to related entities, current (continued) Asesorías Larraín Vial Ltda. provides Larraín Vial Administradora General de Fondos S.A. with different accounting, treasury, operational, custody, risk management, IT, commercial and human resources services. Larrain Vial Administradora General de Fondos S.A., according to the contract with Larrain Vial Servicios Profesionales, provides services for partnership in participation accounts. These transactions are in line with the respective contracts and are recorded at nominal value. The accounts related to Asesorías Larraín Vial Ltda. are paid within 30 days from the date of billing Minimum dividend According to Article 79 of Law 18,046 on Corporations, unless otherwise decided by unanimous vote by the shareholders, an publicly listed company must distribute a minimum dividend of 30% of its net profits for the year, except in the event that the company has losses which have not been absorbed from previous years. This liability is recorded under other short-term provisions and movement of the year is recorded in the Statement of Changes in Equity Other non-financial current assets and other non-financial current liabilities Other non-financial current assets and liabilities are recognized at nominal value since the average payment term is less than 15 days and there are no material differences with the fair value of the same. No bad debt provisions are recorded on this account. 22

25 Note 2 - Significant Accounting Policies (continued) 2.19 Reclassifications As of December 31, 2014, the Company made certain reclassifications in the financial statements in order to improve the disclosures required by the regulations. These reclassifications do not affect the equity or net income previously reported under IFRS. The Company decided to change the presentation in other non-financial current assets and other non-financial current liabilities of the balance sheet. This new presentation provides more relevant information regarding other non-financial current assets and liabilities, helping users better understand the associated risks, and is consistent with the industry practice in relation to these types of assets. This change was applied retrospectively and had no impact on the accumulated results presented in equity, impacting only the total amounts of assets and liabilities on the balance sheet. The table below summarizes the reclassifications made to the balance sheet. Initial balance Reclassification Reclassified balance At December 31, 2013 Note Assets Current assets Other current financial assets 15 3,369,596 (3,183,972) 185,624 Liabilities Current liabilities Other current financial liabilities 15 3,270,171 (3,183,972) 86,199 23

26 Note 3 - New Standards and Interpretations Issued, but Not Effective New accounting pronouncements (IFRS, IFRS Interpretations Committee) The new standards and improvements and modifications to IFRS, as well as the interpretations that have been published during the period are detailed below. At the date of these financial statements, these standards have not yet gone into effect, and the Administrator and its Funds have opted for the early application of IFRS 9 (2010). a) New regulations Fecha de aplicación Obligatoria IFRS 9 Financial Instruments: Classification and measuring January 1, 2018 IFRS 14 Regulatory Deferral Accounts January 1, 2016 IFRS 15 Revenue from ordinary activities Proceeds from Contracts with Customers January 1, 2017 IFRS 9 Financial Instruments In July 2014, the final version of IFRS 9 Financial Instruments was issued, combining all phases of the IASB project to replace IAS 39 Financial Instruments: Recognition and Measurement. This regulation includes new requirements based on principles for classification and measurement and introduces a "more prospective" model to account for expected credit losses for impairment and introduces a substantially reformed focus to accounting for hedging instruments. The entities also have the option to account in advance gains and losses on changes in fair value related to "own credit risk" for financial liabilities designated at fair value through profit or loss, without applying the other requirements of IFRS 9. The regulation is mandatory for annual periods beginning on or after January 1, Earlier application is permitted. The Company is currently evaluating the potential impact of the adoption of these changes on the financial statements. 24

27 Note 3 New standards and interpretations issued, but not effective (continued) a) New regulations (continued) FRS 14 Deferred Regulatory Accounts IFRS 14 Deferred Regulatory Accounts, issued in January 2014, is an interim regulation that aims to improve the comparability of the financial information of entities that are involved in activities with regulated prices. Many countries have industries that are subject to price regulation (for example gas, water and electricity), which can have a significant impact on revenue recognition (timing and amount) of the entity. This regulation allows entities adopting IFRS for the first time to continue to recognize amounts related to price regulation as required by the previous GAAP, however, showing them separately. An entity that already presents financial statements under IFRS should not implement this regulation. Its application is effective beginning January 1, 2016, and early adoption is permitted. The Company assessed the impact generated by the above regulation, concluding that the new regulation has no impact on the financial statements of the entity. IFRS 15 "Revenue from contracts with customers" IFRS 15 Revenue from contracts with customers, issued in May 2014, is a new regulation that is applicable to all contracts with clients, except leases, financial instruments and insurance contracts. It is a joint project with the International Accounting Standards Board (IASB) and the national regulation issuer in the United States, the Financial Accounting Standards Board (FASB) to eliminate differences in the recognition of income between IFRS and US GAAP. This new rule aims to improve the inconsistencies and weaknesses of IAS 18 and provide a model that will facilitate the comparability of companies from different industries and regions. It provides a new model for the recognition of revenue and more detailed requirements for contracts with multiple elements. Additionally, it requires more detailed disclosures. Its application is effective starting on January 1, 2017, and early adoption is permitted. The Company is evaluating the impact that such regulation could have on its Individual Financial Statements. 25

28 Note 3 New standards and interpretations issued, but not effective (continued) b) Improvements and Modifications to Standards Improvements and Modifications Mandatory Application IAS 19 Employee Benefits July 1, 2014 and January 1, 2016 IFRS 3 Business Combinations July 1, 2014 IAS 40 Investment Property July 1, 2014 IAS 16 Property, Plant and Equipment January 1, 2016 IAS 34 Interim Financial Reporting January 1, 2016 IAS 38 intangible assets January 1, 2016 IAS 41 Agriculture January 1, 2016 IFRS 11 Joint Arrangements January 1, 2016 IAS 27 Separate Financial Statements January 1, 2016 IAS 28 Investments in associates and joint ventures January 1, 2016 IFRS 10 Consolidated financial statements January 1, 2016 IFRS 5 Non-current assets held for sale and discontinued operations January 1, 2016 IFRS 7 Financial Instruments: Disclosures January 1, 2016 IFRS 12 Disclosure of Interests in Other Entities January 1, 2016 IAS 1 Presentation of Financial Statements January 1, 2016 IAS 19 Employee Benefits Modifications to IAS 19, issued in November 2013, apply to contributions from employees or third parties to defined benefit plans. The purpose of the amendments is to simplify the accounting of contributions that are independent of the years of service of the employee; for example, contribution of employees calculated according to a fixed percentage of salary. The amendments will become mandatory for annual periods beginning on or after July 1, Earlier application is permitted. "Annual Improvements cycle ", issued in September 2014, clarifies that the depth of the market for corporate bonds of high credit quality is evaluated based on the currency in which the obligation is denominated, rather than the country where the obligation was issued. When there is no market depth for these bonds in that currency, bonds issued by the government in the same currency and terms will be used. The amendments will become mandatory for annual periods beginning on or after January 1, Earlier application is permitted. According to management, this regulatory amendment has no impact on the financial statements of the Company. 26

29 Note 3 New standards and interpretations issued, but not effective (continued) b) Improvements and Modifications to Standards (continued) IFRS 3 Business Combinations "Annual Improvements cycle ," issued in December 2013, clarifies some aspects of the accounting for contingent considerations in a business combination. The IASB noted that IFRS 3 Business Combinations requires that the subsequent measurement of a contingent consideration be carried at fair value and thus eliminates references to IAS 37 Provisions, Contingent Liabilities and Contingent Assets or other IFRS norms that potentially have other measurement bases that do not constitute fair value. References to IFRS 9 Financial Instruments is not eliminated; however, IFRS 9 Financial Instruments is amended clarifying that a contingent consideration, whether it is a financial asset or liability, be measured at fair value through profit or loss or other comprehensive income depending on the requirements of IFRS 9 Financial Instruments. The amendments will become mandatory for annual periods beginning on or after July 1, Earlier application is permitted. According to management, this regulatory amendment has no impact on the financial statements of the Company. IAS 40 Investment Property "Annual Improvements cycle ," issued in December 2013, clarifies that a judgment is required in determining whether the acquisition of an investment property is the acquisition of an asset, a group of assets or a business combination within the scope of IFRS 3 Business Combinations and that this judgment is based on the guidance of IFRS 3 Business Combinations. In addition, the IASB concluded that IFRS 3 Business Combinations and IAS 40 Investment Properties are not mutually exclusive and a judgment is required in determining whether the transaction is only an acquisition of an investment property or if it is the acquisition of a group of assets or a combination of businesses that includes an investment property. The amendments will become mandatory for annual periods beginning on or after July 1, Earlier application is permitted. According to management, this regulatory amendment has no impact on the financial statements of the Company. 27

30 Note 3 New standards and interpretations issued, but not effective (continued) b) Improvements and Modifications to Standards (continued) IAS 34 Interim Financial Reporting "Annual Improvements cycle ", issued in September 2014, clarifies that the disclosures required should either be in interim financial statements or should be indicated by cross-referenced interim financial statements and any report containing it. The amendments will become mandatory for annual periods beginning on or after January 1, Earlier application is permitted. According to management, this regulatory amendment has no impact on the financial statements of the Company. IAS 16 Property, Plant and Equipment, IAS 38 Intangible Assets IAS 16 and IAS 38 establish the principle of the base of depreciation and amortization as the expected pattern of consumption of the future economic benefits of an asset. In the amendments to IAS 16 and IAS 38 issued in May 2014, the IASB clarified that the use of income-based methods to calculate the depreciation of an asset is not suitable because the income generated by an activity that involves the use of an asset generally reflects factors other than consumption of economic benefits embodied in the asset. The IASB also clarified that income generally is an inadequate basis for measuring the consumption of the future economic benefits embodied of an intangible asset. However, this assumption may be rejected in certain limited circumstances. The amendments will become mandatory for annual periods beginning on or after January 1, Earlier application is permitted. According to management, this regulatory amendment has no impact on the financial statements of the Company. IAS 16 Property, Plant and Equipment, IAS 41 Agriculture The amendments to IAS 16 and IAS 41 provide that the accounting treatment of carrier plants should be the same as property, plant and equipment, because their operations are similar to manufacturing operations. The amendments will become mandatory for annual periods beginning on or after January 1, Earlier application is permitted. According to management, this regulatory amendment has no impact on the financial statements of the Company. 28

31 Note 3 New standards and interpretations issued, but not effective (continued) b) Improvements and Modifications to Standards (continued) IFRS 11 Joint Arrangements Amendments to IFRS 11, issued in May 2014, apply to the acquisition of interests in joint operations that constitutes a business. The amendments clarify that the purchasers of these parties must apply all the principles of accounting for business combinations of IFRS 3 Business Combinations and other rules that do not conflict with the guidelines of IFRS 11 Joint Agreements. The amendments will become mandatory for annual periods beginning on or after January 1, Earlier application is permitted. According to management, this regulatory amendment has no impact on the financial statements of the Company. IAS 27 Separate Financial Statements Modifications to IAS 27, issued in August 2014, reestablish the option of using the equity method of accounting for investments in subsidiaries, joint ventures and associates in the separate financial statements. The amendments will become mandatory for annual periods beginning on or after January 1, Earlier application is permitted. According to management, this regulatory amendment has no impact on the financial statements of the Company. IAS 28 Investments in associates and joint ventures, IFRS 10 Consolidated financial statements Amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures (2011) address a recognized inconsistency between the requirements of IFRS 10 and IAS 28 (2011) in the treatment of the sale or supply of goods between an investor and its associate or joint venture. The amendments, issued in September 2014, provide that when the transaction involves a business (both when in a subsidiary or not) a gain or loss is fully recognized. A gain or partial loss is recognized if the transaction involves assets that do not constitute a business, even when the assets are in a subsidiary. The amendments will become mandatory for annual periods beginning on or after January 1, Earlier application is permitted. According to management, this regulatory amendment has no impact on the financial statements of the Company. 29